Netflix (NASDAQ:NFLX) has agreed to license Seinfeld starting in 2021 after rights-holder Sony (NYSE:SNE) Pictures' current contract expires. Starting that year, Netflix's 150 million-plus global subscribers -- maybe more like 200 million by that point -- will be able to stream all 180 episodes of the popular 1990s sitcom from almost anywhere in the world.

Netflix is paying significantly more than the $500 million Comcast's (NASDAQ:CMCSA) NBCUniversal spent on the rights for The Office, or the $425 million AT&T's (NYSE:T) WarnerMedia ponied up for Friends for the same five-year time period, according to the Los Angeles Times. Notably, those rights are for the U.S. only, though.

Still, Netflix is increasingly defined by its slate of original series and films. Paying hundreds of millions for a bunch of old episodes most of its subscribers have already seen seems at odds with that strategy. So, why is Netflix buying up the rights to Seinfeld? I can think of at least three reasons.

A woman sitting at the front desk at Netflix's office

Image source: Netflix

1. The Office and Friends are leaving

Netflix will be losing some of its most popular content over the next couple of years. As mentioned, WarnerMedia bought the rights to Friends starting next year, and its forthcoming streaming service HBO Max will launch with all 236 episodes in April. NBCUniversal will have to wait until 2021 to stream The Office. It'll also have the rights to Parks and Recreation that year. Those three series are currently the three most popular titles on Netflix.

Seinfeld is a suitable replacement for that content. It might not attract the exact same audience as the series leaving Netflix, but it has a very broad viewer base and a large number of episodes. It's the exact kind of comfort TV people seek out when they don't know what to stream.

In that sense, Seinfeld probably won't help attract any new subscribers to Netflix. Neither would Friends or The Office. It will, however, keep subscribers engaged with the platform as they await new originals and increase their perceived overall value of the service. That could enable Netflix to maintain its pricing power with consumers as new competitors come to market.

2. Netflix already has a Seinfeld deal

Netflix signed a deal with Jerry Seinfeld at the start of 2017 to obtain the rights to Comedians in Cars Getting Coffee and secure two new standup specials from the comedian. It also obtained the rights to his first standup special and his documentary, Comedian.

Adding Seinfeld (the sitcom) to the library is a complement to Netflix's other Seinfeld (the person) content. New episodes of Comedians in Cars is an easy suggestion for Netflix to make to someone who's been bingeing on Jerry, George, Elaine, and Kramer.

Seinfeld (the sitcom) rights could strengthen the efficiency of its existing deal with Seinfeld (the person). Inversely, its existing deal with Seinfeld (the person) increases the effectiveness of its new Seinfeld (the sitcom) deal to keep subscribers engaged. That could make the premium over The Office or Friends worth it for Netflix, but not for Netflix's competitors.

3. Because it can

There are a couple of things that enabled Netflix to buy the Seinfeld rights while competitors lost out.

First, Seinfeld is owned by Sony Pictures. Friends, The Office, and Parks and Recreation are owned by media companies looking to compete with Netflix for premium streaming service subscribers. While Sony has its own streaming video service, Crackle, it's shown little initiative to grow viewership through big-name licensing agreements. (Crackle was actually the original home of Comedians in Cars Getting Coffee.)

It's much easier for Netflix to outbid competitors when none of them have a home-field advantage, so to speak. NBCUniversal's $500 million commitment for the rights to The Office is basically Comcast moving money from one pocket to another. If NBCUniversal wanted Seinfeld, it would've had to shell out cold, hard cash for the rights. That's hard to do when it hasn't even launched a product.

And that brings up the second point: Netflix has 150 million global subscribers, and that scale enables it to make much bigger investments than its competitors. On a per-subscriber basis, it's spending far less on Seinfeld than even Hulu spent in 2015. Hulu agreed to pay $160 million to license Seinfeld for six years. At the time, it had about 9 million subscribers. If Netflix were to pay the equivalent price per subscriber today That Hulu paid then, it would have had to make a five-year deal for about $2.25 billion. By that measure, Netflix is getting a bargain.

Netflix is currently the only company with the scale to pull off this deal. And with a boatload of expensive licensed content leaving the service, it took the opportunity to do so.